Marine Renewables: Government Support for Commercial Roll-out

Stephen Crabb Excerpts

Tuesday 8th December 2020 Westminster Hall

[Mr Carmichael]

I absolutely agree because, as I am about to illustrate, we have a nascent industry. It is growing but it is in a position to undertake that important role for the UK on the world stage. According to the UK Marine Energy Council, there are currently 22 tidal stream and 23 wave developers active in the UK, with an estimated investment to date exceeding £500 million of private capital in developing marine energy technologies, and £70 million in direct public support.

Estimates of support suggest that the tidal stream could deliver £1.4 billion gross value added by 2030, while the figure for wave is £4 billion by 2040. Those figures, plus the thousands of jobs that would come with them, are a tremendous prize. There are currently tidal stream sites with an aggregated output of 1 GW under development in the UK, awaiting a positive signal from the Government. The industry is ready to move, the technology is there, the private investment is primed but it does need a helping hand from Government at this critical stage.

[Stephen Crabb (Preseli Pembrokeshire) (Con)]

The right hon. Gentleman and I worked together in Government, and he knows that my constituency in Pembrokeshire is one of those hot prospects for the development of marine renewables in the years ahead. Does he agree that this area has been discussed a lot? It is very easy for everyone to be in agreement about the rhetoric, and how good these things would potentially be in the future, but what we need now is some practical steps that help build investor confidence to unlock the projects and see actual, practical growth in the sector.

[Mr Carmichael]

I absolutely agree. I have been watching and engaging with this industry since I was first elected in 2001. Candidly, we have seen a few false dawns over that time, but it is clear that we have got to that point, where it is so tantalisingly close, that we are now looking at that missing link to get us over the line.

I will offer a couple of illustrations from my constituency. Orbital Marine Power is at the forefront of this industry, and the most recent prototype successfully generated 3.25 GWh into the UK grid during a 12-month period of trials at the European Marine Energy Centre. Orbital has raised £7 million of construction debt finance through the Abundance crowdfunding platform to finance the building of a commercial tidal generator for deployment in spring 2021. Orbital and its investors are now awaiting the right signals from the Government to go fully commercial.

Orbital illustrates well the opportunity that we have here. Some 80% of the Orbital machine currently under construction is from UK suppliers. It believes that this could increase to 95% if the correct market conditions were put in place. The contrast with wind power, which has relied overwhelmingly on imported machinery, is almost too obvious to mention—I say almost, because nothing is ever too obvious to mention in politics.

The same runs true of Nova Innovation, which deployed the world’s first offshore tidal array in Shetland. Construction of the Shetland tidal array had over 80% UK content, including 25% of the supply chain spend in Shetland. Operation of the array has seen 98% UK supply chain content, with over 50% of project expenditure going to companies in the northern isles, such as Shetland Composites, which made the blades for Nova’s turbines and is now one of the top tidal blade manufacturers in Europe. Nova expects this high local content to be replicated at its other UK sites in Wales, Scotland, Northern Ireland and the south of England.

If we can be world leaders in the domestic application of marine renewable technologies, we will also be in pole position to become the leading exporters to the world. Make no mistake: these devices are substantial pieces of engineering, so the potential for jobs and green industrial benefits is enormous—I would say, parenthetically, that this is the point at which we should be looking at export finance support for these companies, so that when we get to that point we are not having to play catch-up.

The missing link, however, has long been one that would give wave and tidal energy the chance to develop commercially to the point at which it would, like other renewable technologies, outgrow the need for subsidy. To get to that stage, it simply cannot be linked in with other renewable technologies—often better established—and told to compete.

That brings me to my first ask of the Minister. We need a bit of fine tuning of the Government’s approach in the next CfD round. It is welcome that tidal and wave technologies will be in pot 2 for the forthcoming CfD round, with offshore wind in a separate pot 3. That learns from the failures of the past, and goes some way to addressing the most obvious weaknesses, which pitted so many technologies at very different stages of development against one another.

What the industry is really looking for is a pot within a pot—in other words, an allocated amount to be competed for by tidal and wave developers at a price that will not only make their projects economically viable and able to attract investment but, importantly, will do so in a manner that does not interfere with the overall objectives of the CfD round. The ability to create that ring-fenced refinement exists within legislation already. It is imperative that we act now. As we know from other renewable technologies, once the process of a commercial roll-out in underway, the costs drop like a stone.

As well as having an immediate effect, the creation of a tidal and wave-specific allocation would provide a clear and long-awaited policy signal and will pave the way for private investment, and not just in the technologies but in the infrastructure required to support the deployment. It is worth remembering that, by definition, most of that work will take place in coastal communities, from the Cromarty firth and the Clyde to the north-west and south-west of England, many of which have suffered badly for years as a result of post-industrial decline, even before the impact of the current pandemic.

My second ask of the Minister is one that he has heard before. The Government should support technology developers by implementing a complementary proposal that would support technology developers not yet able to participate in the CfD process. The innovation power purchase agreement would allow a developer to sell electricity to an electricity supplier at a strike price to be agreed with the Department for Business, Energy and Industrial Strategy.

I understand that that is not a BEIS responsibility and that it sits with the Treasury, and we all know that the Treasury is not always the easiest Department to deal with, so I offer it to the Minister as his opportunity for glory. This emerging industry needs a champion inside Government, someone who will prosecute the case with the Treasury so that the potential that we have all spoken about today can be realised and something that he has heard about can then become a reality. He could be that champion for the marine renewable industry. I can think of nobody better for the role.

In short, what the marine energy sector needs today from the Government is not a handout, but a signal of support that can in turn be used to open the door to private investment and to create a platform for a vibrant industrial sector that ticks all the Government’s boxes: clean energy, technical innovation, world leadership, export potential, industrial regeneration, a genuinely British product, and economic benefits for hard-pressed coastal communities the length and breadth of the United Kingdom. It is an opportunity to turn the rhetoric of the Prime Minister’s speech last week, and the Government’s laudable aspirations for levelling up, into a genuine political reality. If the Minister will take on that cause and fight it for us, he will have the support of all parties and all parts of the country.

[Stephen Crabb (Preseli Pembrokeshire) (Con)]

I had not intended to speak, but now I am on my feet, and why give up the opportunity? I will put on the record again how excited I am by some of the developments off the west Wales coast. There is no shortage of projects coming forward and companies with various track records, but lots of good ideas and good intent for this new industry, which we have debated and talked about a lot in recent years. As the right hon. Member for Orkney and Shetland (Mr Carmichael) said, we are on the cusp of seeing those developments come to fruition if the right conditions are put in place.

[Ben Lake (Ceredigion) (PC)]

Will the right hon. Gentleman give way?

[Stephen Crabb]

I will give way to my next-door neighbour in Ceredigion.

[Ben Lake]

Does the right hon. Gentleman agree that one of the most exciting aspects of the sector’s potential is that areas such as ours in south-west Wales have the opportunity to be at the forefront of a new green industrial revolution?

[Stephen Crabb]

The hon. Gentleman is absolutely right.

The only other point that I will make, before I allow the Minister to respond, is that in a constituency such as mine, for the last almost 50 years, the economy has been heavily dependent on oil refining. We as a country, and as a Government, have now made a commitment to bring forward a ban on the sale of new diesel and petrol engines, and we are moving away from a carbon-based economy. Constituencies such as mine are vulnerable to the big strategic changes that we are mandating as part of our efforts to meet the global challenge of climate change. There is a duty on the Government to help bring forward replacement jobs—high-quality jobs and apprenticeships—in new exciting clean technologies.

[Virginia Crosbie (Ynys Môn) (Con)]

I thank my right hon. Friend for giving way, and I particularly thank the right hon. Member for Orkney and Shetland (Mr Carmichael) for securing the debate—he and I have an awful lot in common, both in our commitment to marine energy and because we come from island communities. However, does my right hon. Friend agree that projects such as Morlais and Minesto on Ynys Môn need to have bespoke Government support packages?

[Stephen Crabb]

I absolutely agree. My hon. Friend is a very active and vocal champion for energy developments in her constituency, and she has put her point on the record very effectively.

I will now allow the Minister to respond to the debate.